The web site of the Iraqi Council of Representatives, the parliament of Iraq, has put out an image of what is appears to be the new interim flag, valid for one year. Further details are available here.
The ratio appears to be 2:3, though the appearance of the image is somewhat forcefully stretched in the web site.
Based on a computer translation of this latter page it seems that the Act passed today amends previous legislation, that is Act No. 33 of 1986 and Law No. 6 of 1991. It appears representatives had four proposals to choose from and that proposal B won by 110 out of 165 votes. The colours of the flag are explained as the Islamic colours. There is also reference to the deletion of article one of the 1991 act, concerning the three stars and the "handwriting of President Saddam Hussein, the President of the Republic." The inscription is to be in bold and occupies one third of the length (?) of the flag.Jan Oskar Engene, 22 Jan 2008

Based on a report from the Information Service of the Iraqi Parliament, and with the help of some rusty automatic translation, it seems the legislation being dealt with this week amends two existing pieces of legislation:

Act No. 33 of 1986 on the flag of Iraq as far as the symbolism of the stars are concerned, and

Law No. 6 of 1991 on the flag of Iraq concerning the colour and style of the inscription.

Apart from this it seems the report contains no details about the contents of the new flag act.
The report from the Information Service of the Iraqi Parliament is available here. The flag-relevant paragraph is at the end of the document.
There is no mention of flag related legislation dating from the period after the toppling of the previous regime following the US invasion. This might be an indication that the flag actually in use now has never been regulated by law.Jan Oskar Engene, 15 Jan 2008

So the 2004 flag with the Kufic writing is only de facto, the previous flag with the more "freehand" script (supposedly of Saddam himself) was still the legal flag [until 2008]?David Kendall , 14 Jan 2008

"Yellow Takbir" Proposal
image by Pascal Gross and Graham Bartram

A news report from AFP news agency reports that the parliament of Iraq will discuss tomorrow a flag bill that proposes to modify the flag of Iraq by formally prescribing that the takbir inscription shall be in Kufic script and that the colour shall be changed to yellow. Furthermore, the symbolism of the stars is to be altered so that in the future they will represent peace, tolerance and justice.
According to the report, parliament will pass a final decision this coming week. If adopted, the flag will be an interim flag for one year after which the flag issue will be discussed again. The proposed change seems to be a step in the direction of appeasing the Kurdish parties that reject the current Iraqi flag because of its association with the Baath Party and the
regime of former President Saddam Hussein.Jan Oskar Engene, 12 Jan 2008

"Eight-Pointed Star" Proposal
image by Eugene Ipavec, 24 Jan 2008

On January 12, 2008, Amme Garrels reported from Baghdad for National Public Radio of yet another flag proposal submitted to the Iraqi parliament and designed by Kais al-Jalele. This flag is most likely to be accepted by the Kurdistan Regional
Government and the Kurds in general.
Absent are the three stars symbolizing the Baath Party (unity – freedom – socialism) and returned is the traditional Iraqi eight-pointed star (utilized by both the royal government and the revolutionary regime of Gen. Abd Al-Karim Qasim, with the golden circle inside, representing Kurdistan, and flanked by the phrase "Allahu Akbar" in the ornamental Kufic script. The color of that star was red under Qasim, now it appears in green.
As you well know, the present "de-facto" flag with its three "baathists" stars, even with the change in calligraphy, was an absolute no-no in Kurdistan, and not displayed even during the visits by the president of the whole country (a Kurd himself) to the region.Chrystian Kretowicz, 14 Jan 2008

The green eight-pointed star with a yellow disc in the center, representing the Kurds, is quite similar to the sun in the center of the 1959 flag.Jan-Patrick Fischer, 23 Jan 2008

"Proposal B" (winner)
image by Eugene Ipavec, 24 Jan 2008

A further news story in the web site of the parliament of Iraq casts some doubt about the progress towards a new or modified flag for the country. Granted, as long as one relies on automated translation, one has to be careful, but the headline of the story spelt out the situation in quite clear terms: "Amendment of the Iraqi flag is a sensation in the Council meeting".
The story goes on to mention that one representative proposed inclusion of some blue element to represent the Turkmen, another proposal was to drop the three stars altogether, while a third was to include instead an eight pointed star. On this last point the translation is not entirely meaningful, however it says the proposal was made by a representative from the Kurdistan Islamic Union, and it seems to fit with the proposal reported by the NPR in the USA (see the post by Chrystian Kretowicz yesterday).
The report ends with some formulations that seems to indicate that the involvement of the President, committees and party blocs in parliament is needed to bring the question further; please have a
look at the latter half of this
document [in Arabic].Jan Oskar Engene, 16 Jan 2008